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25 Jun 2013
Flash: Treasuries a buy on global volatility – RBS
FXstreet.com (New York) - According to the RBS Research Team, “Global markets remain highly unsettled as rising volatility 'shakes down' months/years of policy-induced carry trades.”
While we ultimately believe that the odds are against the US economy performing well enough to elicit a September tapering (especially given events of the past few weeks), we have little confidence that the positioning imbalances that have pushed rates higher (in emerging markets, MBS, dividend rich stocks, municipal bonds, REITS, etc.) have wrung themselves out.
As such, we prefer to ride out the storm in cash or maybe front end Treasuries (2-years around key support ~0.40%) until there are clearer signs that investor positioning is better geared to a world of less central bank policy activism (US and China), elevated geopolitical risks (Middle East, Turkey, Brazil, etc) and renewed strains within the Eurozone. Total Treasury inter-dealer broker volume was 137% of the 10-day average through this morning.
While we ultimately believe that the odds are against the US economy performing well enough to elicit a September tapering (especially given events of the past few weeks), we have little confidence that the positioning imbalances that have pushed rates higher (in emerging markets, MBS, dividend rich stocks, municipal bonds, REITS, etc.) have wrung themselves out.
As such, we prefer to ride out the storm in cash or maybe front end Treasuries (2-years around key support ~0.40%) until there are clearer signs that investor positioning is better geared to a world of less central bank policy activism (US and China), elevated geopolitical risks (Middle East, Turkey, Brazil, etc) and renewed strains within the Eurozone. Total Treasury inter-dealer broker volume was 137% of the 10-day average through this morning.